Essays

With their printing division bringing in 30% of HP’s $91.7 billion in revenue in 2006 — and more than half its operating profit — it’s easy to see why new printers and services are being rolled out to encourage printing. We’ve all known for years it’s the goose that lays the golden egg for HP.

Now the company is backing that contention with a $300 million ad campaign in which it introduces a slew of new printers and devices that allow users to print without the use of a PC. In partnership with Yahoo, HP has created a printing toolbar that makes creative projects easier, giving users how-to tips.

The new printing strategy
Rolled out at HP’s Annual Imaging and Printing Conference last May, their latest printing strategy, Print 2.0, was also much in evidence at the recent O’Reilly Web 2.0. A group of web-based printing tools, services, solutions and technologies, HP states that Print 2.0 aims to make website printing easier, extend its digital content creation and publishing platforms, increase print speed and lower the cost of printing — if you’re a high-volume commercial vendor.

A key part of the strategy involves software from a recent HP acquisition, Tabblo. It enables the reformatting of photos and text on a Web page for standard size paper. HP seeks to make Tabblo a standard such as Adobe’s Acrobat Reader or Sun’s Java. This is a welcome improvement and consumers will probably leap at the opportunity to use software that cuts down on wasted sheets that didn’t format properly or that held only artifacts.

At Web 2.0, participants received the small black book you see above. For attendees with concerns about the ecology, this piece sends the wrong message. Why? Because a need manufactured by a company in its own interest is trumped by an organic need that arises from a consumer. And, there must be a connection to the customer that has more depth to form a relationship.

For example, HP could place an emphasis on their outstanding recycling program — which missed being mentioned in their May 30th news release announcing Print 2.0. One of the lead statements in the release, “…HP will seek to capture a significant share of the 53 trillion digital pages estimated to be printed in 2010 alone — an opportunity valued at more than $296 billion…” identifies an opportunity, but not the one that the company was thinking of. Followed immediately by a sentence that quantified HP’s recycling program and how many of those 53 trillion pages will be recycled due to their efforts, would have grabbed my attention and my pocketbook.

Two roads diverge
The old business model made famous by King Gillette (sell the razor, make our profit on the blades) has been translated by HP into “sell cheap printers and make our profit on the ink.” The model is clearly at a crossroads. With an increased number of gadgets and viewing devices, people are sharing photographs and documents online in geometrically increasing volumes. Cell phones, UMPCs, eBooks and other devices are so readily available, the last thing many people want to do is print. Global warming and environmental concerns make printing seem uncool and wasteful among many 20- and 30-somethings.

This creates a challenge for HP. The company uses sale pricing to encourage printer sales if it forecasts a need for higher profits a few months down the road. The profits result from increased sales of ink and toner cartridges. But the very Gwen Stefani-buying customers it wants to appeal to won’t endorse HP if its products make them feel conflicted over environmental issues. With FY 2007 now reported at $104.3 billion in sales and earnings of $2.93 per share, HP is feeling very comfortable. Building deeper, customer-focused relationships is a good start on protecting their positive financial trend.